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In re Shell Fiji Ltd [2002] FJHC 305; HBE0115J.2001S (26 July 2002)

IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION

WINDING UP ACTION NO.HBE 0115J OF 2001S

IN THE MATTER OF SHELL FIJI LTD.

And

IN THE MATTER OF THE COMPANIES
ACT 1983 (Cap. 247).

Counsel for the Plaintiff: Mr Deo Raj, In Person
Counsel for the Defendant: Q. B. Bale & Associates

Date of Judgment: 26/07/02

JUDGMENT

This is a Petition by one Mr Deo Raj f/n Dwarka Prasad of Nasinu, businessman for the Winding Up of Shell Fiji Limited (“the Company”). The Petitioner contends that the Company owes him the sum of two hundred and eighty two thousand three hundred and ninety six dollars and seventy eight cents ($282,396.78) for cartage fees, refunds of deposits on 240 empty oil drums, plus interests. The said debt had been incurred for the period between July 1993 to April 1994 whilst the Petitioner was plying his trade in Vanua Levu and specifically, Labasa and its surrounds Savusavu and Buca Bay and Taveuni.

The Winding-up Petition together with the Affidavit of Compliance as required under Rule 25 of the Companies (Winding Up) Rules 1987, were duly served on the Company’s head office on 13 December 2001, and Affidavit of Service filed. There is some dispute by the Company as to whether the Service of Notice of Demand under section 221 of the Companies Act (“the Act”) had been properly complied with, although the Petitioner asserted in his Affidavit of 7th May 2002 that he had personally served a copy of the Demand Notice on the Company’s Walu Bay office by leaving a copy of the same with the Receptionist on 22 October 2001. In all other respects, insofar as the requirements under Rule 24(2) and Rule 23(a) of the Companies (Winding Up) Rules are concerned, the Petitioner has complied.

The Company in opposing the Petitioner, is disputing the alleged debt. In its Affidavit in Reply, its Finance Manager states that the Company does not owe any money claimed by the Petitioner.

The Petitioner submits that his distribution agreement of the Company’s products entered into between the parties on 12 November 1993 was on a cash basis only. This was either through a commission basis for delivery of the Company’s products to customers or rebates for purchase of fuels, lubricants and greases. According to the terms of the Agreement, the Petitioner was to be granted a “21 days credit account” for all his purchases provided he presented to the Company a Bank guarantee “of $50,000.00 to cover your monthly purchases from Shell.” Also the Company was to take over first mortgage over Crown Lease 10488. The Petitioner claimed that the agreement went ahead notwithstanding the fact that he failed to provide to the Company the Bank guarantee required.

In his submission to the Court, the Petitioner stated that the arrangement started getting into problems very early due to billing mistakes made by the Company. In 1993 the Company invoiced him with an amount of $7,442.56 which belonged to another of the Company’s clients. Inspite of his protestations, the Company did not concede to the mistaken billing, and the Petitioner later successfully recovered the amount through a Magistrates’ Court action. The Petitioner further claimed, that over a period of time, he had been paying deposits to the Company for the return of empty drums which was agreed that he should be paid at the rate of $50 each plus $1 VAT. These payments of 240 drums remain outstanding to this day and forms the bulk of the claim of the Company’s indebtedness.

There were numerous other mistakes made by the Company which the Petitioner claims, the Company failed to acknowledge and/or rectified, that he had no alternative but to terminate the agreement prematurely. This was done on 28 April 1994 after the Company had failed consistently to respond to his many requests for the records of his 1993/94 accounts. To the present he still continues to request the Company for the details of his account and as recent as 14 March 1998 the Petitioner alleges, the Company had written to the Petitioner advising that it will provide him with all the records of his cartage payments. This was never done.

In summary, the Petitioner’s claim of $282,396.78 against the Company consists of :

1. $98,028.50 being the balance of the amount, owed for cartage fees or charges between July 1993 and April 1994;
   
2. $13,200.00 being refund of deposits for the 240 empty drums; and
   

100. $171,168.28 claimed as interest on the amounts at 13.5 per cent from June 1994 to October 2001.
     

The Company, according to the Petitioner, has not settled the debt and it must be presumed that it is not in a position to pay, hence this Winding Up actions.

For its part, the Company argues that all of the Petitioner’s outstanding claims had been settled in December 1996, except for the amount of $4,700.00 which was in dispute. This was resolved finally on the Small Claims Tribunal. (Case No. 3020/97) in favour of the Petitioner. The Company does not owe anything at all to the Petitioner. Quite apart from this, the Company says that the Petitioner’s existing claim is devoid of any details of the alleged debt. For example, while he is claiming cartage fees, there are no details provided by the Petitioner. Similarly, the refund on drums although identifiable in the numbers (240 drums) no specific details as to delivery and documentation has been provided.

But even if there exists any debts, the learned Counsel for the Company argued that the claim is statute-barred under the Limitation Act Cap. 35 (“the Act”). According to Counsel, the cartage fees claimed by the Petitioner were in respect of distributions of the Company’s products that the Petitioner carried out between July 1993 to April 1994. Similarly, the deposits for the 240 empty drums had been paid between July 1993 and April 1994. This Petition was filed in December 2001, more than 6 years after the cause of action accrued. Unfortunately the argument that the Petitioner’s Claim is statute-barred was not raised by the Company in its Affidavit or anytime prior to the hearing of the Petition. It is the duty of Counsel to raise legal arguments and especially on matters that substantially affect the proceedings and to bring them to the attention of the Court as early as possible. Especially in cases such as this where the Petitioner is a layman and acting on his own behalf and where the legal and technical details do not necessarily show up more clearly in the documents filed than it would otherwise have done. It would certainly have been propitious to the Court as indeed it would be for all the parties concerned if the issue was raised before the actual hearing.

As it happens, the Petitioner, while acknowledging that the claim is over 6 years old nevertheless asserts that the limitation period is not applicable to his case. Firstly, the Company had been leading him on by the management promising him from the period in question up to 1998, first to reconcile his accounts and pay any outstanding balance, and again later in late 1998 when the Company undertook that it will provide the Petitioner the full details of this account. The Petitioner further argued that the Company finally gave a “partial statement” of his account on 29 August 1999. It is for these reasons and the belief that the Claim was eventually going to be settled by the Company according to the Petitioner that prevented him from seeking Court redress any sooner.

The learned Counsel for the Company stated that the Company denied it had entertained the Petitioner’s requests for settlements and that the claims that were settled by the lower Courts were in respect of those that had been found to be genuine and valid by the Company. The Petitioner has, according to the Counsel for the Company, a further 9 other proceedings against the Company on similar types of claim, and he is no more than a vexatious litigant.

The basic consideration in the Court’s determination to grant or refuse an application for a Winding Up Order is whether there is a substantial dispute as to whether or not a debt is actually owed. The law on this was comprehensively examined by Pathik J. in In the Matter of All Safe Safety and Protection Proprietary Limited (Winding Up Cause No. 43 of 2001 Unreported). There His Lordship began with the general principle to be borne in mind in a Court’s consideration as set out in Palmer’s Company Law (Vol. 3 para. 15.214) to whit :

“To fall within the general principle the dispute must be bona fide in both a substantive and objective sense. Thus the reason for not paying the debt must be honestly believed to exist and must be based on substantial or reasonable grounds “substantial” means having substance and not frivolous, which disputes the Court should ignore. There must be so much doubt and question about the liability to pay the debt that the Court sees that there is a question to be decided. The onus is on the Company “to bring forward is prima facie case which satisfies the Court that there is something which ought to be tried either before the Court itself or in an action, or by some other proceedings.”

His Lordship then alluded to the discretion of the Court as per Barker J A in Offshore Oil NL and Investment Corporation of Fiji Limited (Civil App. 29/84 FCA at p.15) and the Privy Council’s decision in Bateman Television (In Liquidation) and Another vs Coleridge Finance Company Limited [1971] 1 NZLR, on whether to hear a petition or not.

From the evidence submitted to the Court, it is very clear that the agreement signed on 12 November 1993 between the Petitioner and the Company was for payment by the latter to the former be it by commission or rebate, of distribution (service), and sale (concession) of the Company’s products to retailers. It is equally clear that there have been one or two instances of wrongful billing by the Company of the Petitioner’s accounts resulting in successful recovery actions by the Petitioner.

However, the Company has totally denied the existence of any debts owed by the Company to the Petitioner which represent cartage fees and refunds for deposits on empty drums which are detailed in the Petitioner’s claim. In support of this assertion, the Company states that the Petitioner has never provided sufficient details or particulars of the claims to lend credence to them. All the Petitioner had provided for example were in the case of empty drums individual monthly accounts supposedly owed by the Company for unspecified number of empty drums between July 1993 to March 1994. Under the circumstances the test set out by Harman J.in In Re a Company (No.001946 of 1991) exp. Fin. Soft Holding SA (1991) BCLC 740, and referred to by Pathik J. in In the Matter of All Safe Safety and Protection Proprietary Limited (supra) whether there is a substantial dispute as to the debts must be answered in the affirmative, in this case. The fact that there exists, as far as the Petitioner is concerned, a very unsatisfactory state of affairs pertaining to his account with the Company, is not of itself ground for Winding Up of the Company.

The learned Counsel for the Company in its opposition to the Petition also argued that the grounds under which the Petition is filed and relied upon, namely that “the Company is unable to pay its debt” (s.220 of the Act) is misconceived . Counsel argued that the Company is a multi-national, operating world-wide and has the ability to pay its debts. With respect to this argument and Counsel, the definition of what constitutes inability to pay debts under section 221 of the Act makes clear that such inability does not necessarily mean that it can be negated by proving one’s ability to pay, but also failure to do so through omission or neglect.

Finally the argument on the application of Limitation Act as I have already stated, it is unfortunate that the issue was raised very late in these proceedings. However, the Petitioner conceded that he was conscious of the fact that his claim falls outside the 6 years limitation period allowed under the Act. But, he argued, that the Company had waived the application of the Act by its continuing negotiation with him, on the debts well after the 6 years had lapsed. But to succeed in this argument that Petitioner has to satisfy that exceptions to the limitation period provided under any of the provisions of Part III of the Act. Unfortunately the Petitioner does not fall into one of the exceptions recognised in law. The sad fact of the matter is whilst it may be strongly argued by the Petitioner that the Company had continued to openly entertain approaches on his claims even after the 6 years period had expired, in the absence of any written acknowledgment by the Company of the existence of the debt and even part-payment of the same, the action is statute-barred.

Under the circumstances, the Petition is dismissed and costs in the sum of $200.00 I award to the Company.

F. Jitoko
Puisne Judge

At Suva
26 July 2002